Multinational Gas and Petrochemical Co v Multinational Gas and Petrochemical Services Ltd
| Multinational Gas and Petrochemical Co v Multinational Gas and Petrochemical Services Ltd | |
|---|---|
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| Court | Court of Appeal |
| Decided | 16 February 1983 |
| Citation(s) | [1983] Ch 258 |
| Court membership | |
| Judge(s) sitting | |
| Keywords | |
| Directors' duties | |
Multinational Gas and Petrochemical Co v Multinational Gas and Petrochemical Services Ltd [1983] Ch 258 is a leading United Kingdom company law case relating to directors' liability. The case is the principal authority for the proposition that a company will not be able to make any claim against a director for breach of duty where the acts of the director have been ratified by the members of the company.
The plaintiff company (Multinational Gas and Petrochemical Co) was a joint venture company formed between three shareholders to engage in trading, storing and shipping liquified natural gas. Originally the company was to have been incorporated in the United Kingdom, but after taking tax advice it was incorporated in Liberia instead, and a separate English company - Multinational Gas and Petrochemical Services Ltd (referred to as "Services") in the judgment - was incorporated to act as broker and agent. The board of directors of the plaintiff company was composed of appointees from the three shareholders.
Although the business was initially successful, it later collapsed with its liabilities exceeding the value of its assets by over GBP113 million. A liquidator was appointed, and began examining ways in which the company might seek to recover against third parties for the benefit of the creditors. The liquidator brought proceedings against Services alleging negligence in relation to the provision of financial information to the company. In the same action it also brought proceedings against each of its directors alleging negligence in failing to appreciate the obvious deficiency in information provided by services, and making highly speculative and negligent decisions which could not reasonably be regarded as coming within the "business judgment rule".
Although the case is remembered primarily for the statements with respect to company law (referred to in both arguments and the judgment as the "company law point"), the actual decision that the Court of Appeal was required to make related to a procedural point on leave to serve proceedings out of the jurisdiction under RSC Order 11 (now repealed). Because none of the directors were resident in the United Kingdom, and none of the acts complained of by the directors had occurred within the jurisdiction (all board meetings had occurred overseas for tax reasons), it was necessary to obtain the leave of the court to serve out. In order to do so, the plaintiff company needed to satisfy the court either that the acts complained of occurred within the jurisdiction (which the court disposed of rapidly), or that the defendants were a necessary and proper party to an action which was properly commenced against a defendant within the jurisdiction (Services). On this latter point most of the argument was focused.
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